'Fiscal cliff' compromise comes too late

'FISCAL CLIFF'

Updated 11:47 pm, Monday, December 31, 2012

Vice President Joe Biden outlines the compromise agreement for reporters after meeting with Senate Democrats.

Vice President Joe Biden outlines the compromise agreement for reporters after meeting with Senate Democrats.

Photo: Alex Brandon, Associated Press

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Senate Minority Leader Mitch McConnell is surrounded by reporters as he returns to his office.

Senate Minority Leader Mitch McConnell is surrounded by reporters as he returns to his office.

Photo: Drew Angerer, Getty Images

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WASHINGTON, DC - DECEMBER 31: U.S. President Barack Obama delivers remarks about the fiscal cliff negotiations in the Eisenhower Executive Office Building next to the White House December 31, 2012 in Washington, DC. Obama said he was hopeful that an agreement could be found to avert the fiscal cliff in Congress, which is closing in on a deal that would raise taxes on households that make more than $450,000 a year and individuals who make more than $400,000. (Photo by Chip Somodevilla/Getty Images) *** BESTPIX *** less

WASHINGTON, DC - DECEMBER 31: U.S. President Barack Obama delivers remarks about the fiscal cliff negotiations in the Eisenhower Executive Office Building next to the White House December 31, 2012 in ... more

Photo: Chip Somodevilla, Getty Images

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Sen. Tom Coburn, R-Okla. gets into an elevator on Capitol Hill in Washington, Monday, Dec. 31, 2012, as negotiations continued to try and reach a deal to avoid the fiscal cliff. (AP Photo/Susan Walsh)

Sen. Tom Coburn, R-Okla. gets into an elevator on Capitol Hill in Washington, Monday, Dec. 31, 2012, as negotiations continued to try and reach a deal to avoid the fiscal cliff. (AP Photo/Susan Walsh)

Photo: Susan Walsh, Associated Press

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President Barack Obama gestures as he speaks about the fiscal cliff, Monday, Dec. 31, 2012, in the South Court Auditorium at the White House in Washington. The president said it appears that an agreement to avoid the fiscal cliff is "in sight," but says it's not yet complete and work continues. (AP Photo/Charles Dharapak) less

President Barack Obama gestures as he speaks about the fiscal cliff, Monday, Dec. 31, 2012, in the South Court Auditorium at the White House in Washington. The president said it appears that an agreement to ... more

Photo: Charles Dharapak, Associated Press

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U.S. Vice President Joe Biden arrives to a Democratic caucus meeting with Senator Harry Reid, a Democrat from Nevada, left, at the U.S. Capitol in Washington, D.C., U.S., on Monday, Dec. 31, 2012. Biden arrived at the Capitol to present a budget deal to wavering Democrats, in advance of a possible vote by 10:30 p.m. tonight, with tax increases for almost every U.S. worker set to start tomorrow. Photographer: Andrew Harrer/Bloomberg *** Local Caption *** Joe Biden; Harry Reid less

U.S. Vice President Joe Biden arrives to a Democratic caucus meeting with Senator Harry Reid, a Democrat from Nevada, left, at the U.S. Capitol in Washington, D.C., U.S., on Monday, Dec. 31, 2012. Biden arrived ... more

Photo: Andrew Harrer, Bloomberg

'Fiscal cliff' compromise comes too late

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Washington --

The White House and Senate Republicans were reported to be in agreement on a deal to blunt the financial turmoil that loomed over the "fiscal cliff" impasse, even as the country headed toward a technical tumble into the chasm at midnight Monday.

Final approval, though, remained uncertain and cannot come in time to prevent the double blow of tax increases and sweeping spending cuts - at least technically.

Vice President Joe Biden was selling the deal to Senate Democrats late Monday, which voted 89-8 in favor of the package early Tuesday. The House had already adjourned and is not expected to take up anything the Senate might pass until noon Tuesday at the earliest.

On New Year's Eve, a day in which the halls of Congress typically are abandoned, lawmakers of both parties scrambled to get the deal done. They failed to meet the midnight deadline, but the emerging agreement between the administration and Senate Republicans held open the prospect that President Obama and both houses could come up with a pact before financial markets open Wednesday.

The decision by the House Republican leadership late Monday to adjourn came as a blow after statements by Obama and Senate Minority Leader Mitch McConnell, R-Ky., indicated that progress was being made on tax and spending issues.

Deadline expires

Any whiff of new tax revenue poses potential problems for House Republicans, who have sent a strong message to Speaker John Boehner, R-Ohio: No new taxes. The House's closure meant the midnight deadline expired without congressional and White House action to stop the automatic tax increases and $110 billion in government spending cuts from going into effect.

The move fueled speculation that House Republicans would come back to work on New Year's Day and vote to rescind the tax hikes, thereby allowing them to boast that they had voted to cut taxes.

If this happens and Obama signs off on the package, the actual economic impact of going over the cliff may turn out to be minimal. However, the whole episode is likely to add to the tarnished reputation of the federal government - particularly Congress - which is seen as ill-equipped to deal with the nation's problems.

Larry Sabato, director of the University of Virginia's Center for Politics, said House Republicans may see an advantage in voting on the tax package in the New Year - after the nation has technically gone off the fiscal cliff - so they can claim they voted for tax reductions, not tax hikes.

"It's ridiculous, but that's politics," Sabato said. "The politics of waiting a day or two in this instance are tremendous."

Democrats had initially demanded increased tax rates for couples making more than $250,000 per year. The deal being discussed would set the threshold for higher tax rates at $450,000 in annual income.

Rep. Charlie Gonzalez, D-Texas, said Democrats would accept the higher number, but he questioned whether Republicans would approve such a deal, noting that GOP lawmakers rejected an earlier proposal by Boehner that would have raised rates on wages over $1 million.

The legislative chaos illustrated the long reach of electoral politics almost two months after the 2012 election appeared to endorse Obama's "balanced approach" of new revenue through tax hikes on the wealthy, combined with spending reductions favored by Republicans.

Political gamesmanship

Norman Ornstein, veteran political scientist with the American Enterprise Institute, attributed the lion's share of political gamesmanship to House Republicans who, election results notwithstanding, are trying to avoid a vote for tax increases.

"This is crazy," he said. "Even a fairly decisive election didn't cure the dysfunction or the tribalism. It's become clear late in the game that House Speaker John Boehner is a prisoner of his own Republican House caucus.

"What we have here is the radical right wing of the Republican Party wagging the whole elephant."

The tax increases that take effect Tuesday stem largely from the expiration of tax cuts, including Bush-era tax reductions, as well as lower rates on capital gains and dividends and the reduced Social Security payroll tax.

Rep. Sam Farr, D-Carmel, blamed the Tea Party for "hijacking" the House. He said Nancy Pelosi, D-San Francisco, managed to pass the bank rescue package for a Republican Bush administration when she was speaker, even though her Democrats were furious.

"She did it, and when the vote was counted, there were more Democrats that voted for it than Republicans," Farr recalled. "Here we are, Boehner's now the speaker, and he can't bring a bill to the floor. He won't talk to the minority leader (Pelosi), telling her how many votes he needs, which is usually what happens. That's been part of the problem. It's just a lack of leadership on the Republican side to live up to the responsibilities of the institution."

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